Beyond the zombie economy

The UK’s productivity problem not only long precedes the Brexit discussions. It also long precedes the 2008 financial crisis. Longer-term studies actually reveal that the decline in productivity growth, not just in Britain but across mature industrialised countries, has been pretty relentless since the 1970s. That its slowdown began so long ago means the problem is deep-seated and therefore justifies a substantial strategic response. This is usually presented as an activist industrial policy.

But the big paradox about industrial policies is the contrast between the extensive cross-party consensus on this issue and the lack of headway in reviving investment and productivity. Read the full article here.

 

The myth of Corbyn’s radicalism

Given the fears generated by the prospect of a Corbyn-led government, just how radical is it likely to be? Should we really expect Britain’s first anti-capitalist government? Certainly not on the basis of what Corbyn and McDonnell and their cheerleaders have been writing and saying about their future Labour government. Read the full essay here.

2019: the economic picture isn’t rosy

Compared to the start of 2018, economic forecasters at the end of the years are much more gloomly about global economic prospects for the forthcoming period. Trade wars, the ‘end’ of cheap money, excessive emerging market corporate debt, and Britain ‘crashing out’ of the EU are some of the major risks identified in the turn-of-the-year economic projections. We’re told that sluggishness is taking hold again.

Despite the shift in tone there is still too much complacency about the deeper challenges we’re facing. Here are three that deserve more attention and discussion, not just by forecasters but by all of us: accumulating Western atrophy inflaming international economic unevenness; exorbitant debt levels in the mature nations; dysfunctional economic policies.

Read the full article here

The crash 10 years on

The most telling contemporary observation about the ‘worst financial crisis in global history’ (to quote Ben Bernanke, who was chair of the US Federal Reserve when the crash hit in 2008) is that its causes are unresolved. It is true that the financial crash brought about a recession 10 years ago, but it did not trigger the fundamental weakness of the real economy. Slowing productivity growth across the mature economies can be traced back to the early 1970s. It was from that decay within production that the rot spread, gradually, unevenly, but steadfastly. The financial crash was simply one of this decay’s most serious manifestations.

Despite the shock felt in 2008, it is striking how little has changed in economic terms since then.

Read the full article here

Ten Wasted Years: The Crash One Decade On

This summer has seen the start of the discussion about the 10th anniversary of the financial crisis. It’s a discussion that will continue through to autumn next year. To recap, it was on 9 August 2007 that the French bank BNP Paribas announced that the ‘complete evaporation of liquidity in certain market segments of the US securitisation market’ had ‘made it impossible to value certain assets fairly’. This blunt admission by BNP Paribas that it could no longer price, and therefore redeem, investments in three of its funds triggered a breakdown in trust between financial institutions.

As a result, the wide diversification of repackaged debt around the financial system, which had previously been heralded as sound ‘risk management’, backfired. No one seemed to know which bundles of paper were worthless, so none could be relied upon. Credit markets began to freeze up.

Read the full article here.

We have nothing to fear but the fear of Brexit itself

British people are being told that there are two ways to approach Brexit, and they have to choose between them. An ideological way or a pragmatic way. Guided by formal principle or by practical necessity.

Catherine Barnard, professor of European Union law at Trinity College Cambridge, described the apparent options as follows: ‘You either have to prioritise sovereignty and domestic control, which has very significant economic costs; or you have to be more pragmatic and put a priority on your economic interests. A decision will have to be taken.’

So this is a stark choice, apparently, between sovereignty and economic livelihoods. The implication is that people shouldn’t be so stupid as to bring on economic deterioration resulting from a stubborn attachment to something as pretentious as wanting to ‘take back control’ over their nation and lives.

It is important that we cut through this presentation of Brexit. Read the full article here.

 

May’s industrial strategy will fail unless it clears out zombie firms

My opinion piece for City A.M. arguing that in order to generate a new dynamic for economic growth, government has first to stop propping up the zombie economy. The application of many regulations, of government spending and procurement policies, changes to insolvency rules, easier monetary policies – all these and more have acted to support incumbent businesses. The full article is here.